Luxembourg takes ‘defensive’ measures against Cayman

In spite of the crisis Luxembourg is proceeding with what it calls ‘defensive’ measures against Cayman. But Ireland, with stronger Cayman connections, is not. The EU’s random approach to blacklisting matters is odd.

On March 20 a draft law was submitted to the parliament in Luxembourg to disallow the tax deductibility of interest and royalties paid to related entities located in the EU’s list of Non-Cooperative Jurisdictions for Tax Purposes. This includes Luxembourg. Luxembourg’s Council of Ministers then approved in principle the new draft law on March 25.

Maples state that it may not enter into force until January 2021. There is a hope that Cayman could come off the EU’s blacklist after the next ECOFIN meeting in October. Should that happen then it would mean that fund transactions between Luxembourg and Cayman would be unaffected.